Central Power Plants: An Endangered Species?
August 27, 2014
Within a few decades, large-scale, centralized electricity generation from fossil fuels could be a thing of the past in Europe.
That’s the word from investment bank UBS, which just released a new report anticipating a three pronged assault from solar power, battery technology, and electric vehicles that will render obsolete traditional power generation by large utilities that rely on coal or natural gas. According to Renew Economy, which picked up the report, the tipping point will arrive around 2020. At that point, investing in a home solar system with a 20-year life span, plus some small-scale home battery technology and an electric car, will pay for itself in six to eight years for the average consumer in Germany, Italy, Spain, and much of the rest of Europe. Crucially, this math holds even without any government subsidies for solar power.
“In other words,” the report says, “a German buyer should receive 12 years of electricity for free” for a system purchased in 2020.
That would mean that after 2020, the economic incentives will align to encourage the average European household to stop relying on the traditional utility model for their electricity needs. “Not all [power plants] will have disappeared by 2025,” the report concedes, “but we would be bold enough to say that most of those plants retiring in the future will not be replaced.”
The analysis also suggests that for utilities to survive in this new world, they’ll need to focus on providing smart distribution networks to better manage demand on a much more decentralized grid, and providing small-scale local back-ups for storage and power generation to that same effect.
The way this would work on the household level is that the electric car could charge at night, solar would provide electricity during the day, and excess solar generation stored up in the battery could be discharged in the evenings to cover most of a household’s remaining power needs. Power supplied by the grid likely wouldn’t go away completely, but would be relegated to plugging some small remaining holes, primarily in the early morning. And smarter grid systems for homes will allow energy demand to be met with supply much more efficiently.
In a major report on the “revolution” that could hit energy markets any time soon, UBS says – as we report here – that the combination of EVs plus solar plus storage will deliver a payback time of 6-8 years by 2020 – effectively making centralised fossil fuel generation redundant.
It says this is not understood by the utility industry or the market, because they are “not yet looking at the topics of solar, EVs and stationary batteries with a holistic view.”
“Our proprietary model (above) shows it is the combination of the three that makes solar fully competitive and that has the potential to bring disruptive changes to the electricity sector.
“Here are the maths: One can leverage the EV purchase with an investment in a solar system and a stationary battery. By doing so, one can optimise the self-consumption of solar power and minimise the “excess waste” of solar electricity.
“And what also may matter to many EV buyers: The electricity used to drive the car is carbon-free. The combination of and EV + solar + battery should have a payback of 7-11 years, depending on the country-specific economics. In other words, based on a 20-year technical life of a solar system, a German buyer should receive 12 years of electricity for free (purchase in 2020).”
UBS says pure battery EVs will be competitive with cars with internal combustion engines, and in some instance may already be so.